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Drop in auto plant closings reduces jobless claims

WASHINGTON – The number of people seeking U.S. unemployment benefits plunged last week. But a big reason is that automakers have skipped some of their usual summer shutdowns to keep up with demand, causing fewer temporary auto layoffs.

Economists expect the number of Americans seeking unemployment aid to go back up in coming weeks.

The auto industry’s recovery has helped support the struggling U.S. economy. U.S. auto sales in the first half of the year jumped 15 percent over the same period a year ago. Sales of new vehicles surged in June. Automakers also began Independence Day promotions early, lifting sales at the end of the month.

The Labor Department adjusts the number of applications for unemployment aid to account for seasonal factors. But it didn’t anticipate fewer temporary shutdowns of auto plants this summer – and fewer auto layoffs. That distorted the seasonally adjusted data it released Thursday.

And that may largely explain why applications for unemployment aid tumbled 26,000 last week to a seasonally adjusted 350,000 – the fewest since March 2008.

Automakers traditionally close their plants in the first two weeks in July to prepare them to build new models, and their employees often file for unemployment benefits. But Ford Motor Co. said in May that it would reduce its usual two-week closing to just one week. And Chrysler canceled the normal two-week shutdowns at three factories.

At the same time, hiring has slowed sharply compared with the first three months of the year. Employers added only 80,000 jobs in June, the third straight month of weak hiring. The unemployment rate was stuck at 8.2 percent.

And wages have barely kept up with inflation over the past year, leading consumers to pull back on spending.

Senate rejects Democrats’ business tax cut proposal

WASHINGTON – The Senate has rejected a Democratic bill providing tax breaks to companies that enlarge their payrolls or make major purchases or plant improvements.

The vote was 53-44, seven short of the 60 votes required to overcome GOP procedural hurdles.

The roll call came after senators voted 73-24 against a Republican version that would have provided a tax deduction to U.S. companies with fewer than 500 employees.

The votes were being held during a campaign season in which neither party wants to give ground in the struggle over how best to spark the economy and for whom to cut taxes.

The Democratic measure would give 10 percent tax credits, up to $500,000, for the amount by which a company’s 2012 payroll exceeds last year’s. It would cover new hires or raises for existing workers.